Political, philosophical, and theological reflections from a Christian idealist with libertarian leanings and a professional interest in science and mathematics.

Monday, June 27, 2011

Regulating away small businesses

In his chapter on "Bacon," Joel Salatin explores how government regulations hurt small businesses and favor big ones. His own story is that government regulations have forbidden him from curing bacon on his farm. He outlines the infrastructure needed to cure bacon:

We needed an inspected curing facility. The meat needed to be transported in an approved container. ... Must be a refrigerated vehicle. Let's say we spring the thousands of dollars necessary for a refrigerated vehicle so we can legally transport the meat home. Now it goes into a permitted facility on the farm for curing. One little problem: processing facilities are illegal in agriculturally zoned areas, because this procedure is not considered farming; it's considered industrial or commercial use.

This curing facility needs bathrooms and an office for the bureaucrats to do their paperwork. It needs impermeable walls and washable floors, so many lumens of light per square foot, and handicapped access. It needs temperature control, with 24-hour monitoring disks. And we need to calibrate all the thermometers monthly--that only takes a few hours a month. And each calibration must be duly noted on a form with the non-transferrable thermometer delineation in order to insure efficacy.

"The important thing to remember here," Salatin says, "is that competency does not require any of this infrastructure. Folks around here have been curing pork for centuries, safely, in crude on-farm cabins and outbuildings." He goes on to say:

The problem with all these infrastructure and paperwork requirements is that they are non scalable. They discriminate against the small operator because the big outfits have enough volume to spread the high cost over additional product.

For instance, a neighbor of his who makes old-fashioned pickles using five-gallon stock pots needs to use several stock pots for a single batch of product to increase her efficiency. But the FDA won't let her call that one batch; each individual pot is considered a batch! "A large outfit cooking in a 1,000 gallon pot," on the other hand, "has the same paperwork as she does using a five gallon pot." The absurdity of these regulations is painfully obvious to the average person, but not to the government.

One of the things that the government does to make markets less free, less efficient, and most of all less just is by artificially creating a higher cost of entry into a market. That is what Salatin is complaining about here. Large, established businesses have an inherent advantage over small, start-up businesses when the latter are subject to the same, non-scalable regulations. For instance, in the case of the woman making old-fashioned pickles, "The labor to hire a full-time paper-filler-outer for the small outfit is 20 percent of the labor force. For the big outfit, it's less than 5 percent." This is anything but a "level playing field." Laws should apply equally to all people; here they clearly do not. They only appear so, because everyone must purchase the same infrastructure. But arguing that this counts as equal treatment is like arguing that income tax should be the same dollar amount per person, instead of paying in proportion to income earned!

Our culture is far too accepting of a system which favors big business, and then expects the strong arm of government to control those businesses for us. The whole thing works on a system of favoritism in which government and big business collude. Salatin illustrates:

I had an interesting attorney visit recently who represents the alrgest fast food chain in the world. He is part of that famous revolving door between Congressional staff and large corporate offices. He said the reality is that the large processor has problems with over-zealous bureaucrats too. Bu they have attorneys like him, on retainer, who simply fix it. His job is to contact the appropriate supervisors at Food Safety and Inspection Service and call of the dogs, so to speak.

He said bureaucrats are bureaucrats and don't really care whether they are dealing with big operators or small ones (at least that's his perspective). But it looks like they give the big guys a pass because the big guys can afford to hire go-betweens that use their ability to entertain, buy, bargain, or cajole to garner concessions as necessary. The small processors can't afford to hire a full-time attorney to do this work because they can't spread the cost across millions of pounds. As a result, when the small outfit feels the brunt of bureaucratic unreasonableness, the only recourse is to capitulate, repent in sackcloth and ashes, ask, "What must I do to be saved?" and try to placate the officials.

According to him, it's not really a discriminatory application of the law; it only appears to be so. If the little guys would become big guys and hire people like him, they could enjoy the benefits of retained insiders to run interference too. In other words, the solution for small businesses is to become big businesses and all will be well. He probably votes Republican.

The rest of the chapter tells just how bad it gets through personal anecdotes of lobbying the Virginia legislature concerning these ridiculous regulations. Needless to say, it's depressing.

Those of us who care about liberty ought to be outraged by this in general. And then again, those of us who care about people buying local food should be equally concerned.

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About Me

I am a Christian who thinks that love is what the world needs. I am a mathematician who thinks that truth is worth seeking passionately. I like to read about current issues, like religion (and its relation to modern science), economics, education, abortion, and war. I don't have it all figured out, but writing about it helps me clarify my own thoughts. Socrates is one of my heroes.